I want to make a few comments about the separation of Royal Mail and the Post Office. Key provisions in the Bill allow for the privatisation of Royal Mail and the formal separation of Royal Mail and the Post Office. Formal separation offers considerable advantages for the Post Office. For example, it would be managed by a board that could be more closely aligned to its own strategic objectives, and would no longer be a junior partner in group decision making. However, the Government have announced that they will seek a refreshed 27 Oct 2010 : Column 377
inter-business agreement between Royal Mail and the Post Office. Will subsequent contracts be subjected to a competitive tender process given that, as Opposition Members have pointed out, there would be no guarantees that the Post Office would retain its mail contract thereafter? I fully accept that there may be arguments against seeking to maintain the contractual relationship between the Post Office and Royal Mail in perpetuity as we cannot reasonably assume that consumer need will necessitate upholding the current access arrangements indefinitely. I also understand why, in light of future uncertainties, the Bill must not be too prescriptive, but might it include provision for the Secretary of State to seek a review of the access criteria at a future date, subject to parliamentary approval?

On the division of assets between the Post Office and Royal Mail, the Bill allows for the transfer of property or other assets between parts of Royal Mail Holdings plc. These provisions allow property transfers to be made directly by the Secretary of State or the holdings company. My worry is that the Post Office has frequently taken a minor role compared to Royal Mail, so when negotiating the property transfers, we need to ensure that the greater weight of Royal Mail is not used unfairly. Therefore, can the Government take steps now, in advance of measures contained in the Bill and the separation of the holdings company taking effect, to maintain the Post Office's current assets?

Finally, there is speculation about who might buy Royal Mail. All the protections I have mentioned must be in place, but I would like whoever the purchaser might be to be given the best possible chance to make Royal Mail a world-beating postal service.

Royal Mail is currently hamstrung by regulations that make it uncompetitive against outside competitors, so can we examine those seriously? We want to make Royal Mail a much more attractive proposition for a prospective purchaser and ensure that the staff and new management, together, can make it the full and profitable service that it deserves to be.

3.55 pm

Kate Hoey (Vauxhall) (Lab):
I feel like saying, "Here we go again", because in my time in Parliament we have been through three different attempts to privatise Royal Mail in some form or other. All three attempts have failed, and I think that we will decide not to get this one through. I am convinced that the public, whatever their attitudes and their knowledge of what is going wrong on some of the issues relating to Royal Mail, do not want a fully privatised Royal Mail or, indeed, a partly privatised one. It is a pity that the previous Government's approach-my Government-almost left it open, as many Labour Members said, for another Government to carry on and go much further. So I feel a kind of déjà vu here.

The bit of the Bill that I really welcome is the lifting of the pension fund burden, but that can be done anyway-it should have been done by the previous Government. We did not need to go through all this 27 Oct 2010 : Column 378
time, effort and waste of money on consultants to know that the Royal Mail was in a bad state. Part of that was because of the pension fund deficit. Whose problem was that? It was certainly not that of the men and women who deliver our post or the members of the Communication Workers Union; it was, purely and simply, that of Governments of all complexions, who allowed the pension holiday to be taken.

A lot has been said about modernising, but the thing that made such a difference to why the Royal Mail started to decline in many people's view was that for some years it had shockingly bad management. All they seemed to want to do was pay themselves grotesque salaries at the top, while the limited investment that was being made was not put into the modernisation that should have taken place. The position is slightly changed now, because the new management at Royal Mail are a different kind of management. I am not saying that they are absolutely perfect; I was very disappointed in the letter that was sent out, to which reference has been made, concerning the question of wanting to free up some of the universal service points. That is worrying, but recently there has been a real improvement in relations between the management and the CWU.

A lot of the modernisation has gone ahead: new machinery and technology has been introduced, aligned with the new six-day standardised work plan; delivery methods have improved; and the equipment and the ways of working have changed. We have to examine mail and distribution centre rationalisation but, as I said in an intervention, closing the Vauxhall Nine Elms facility would be crazy, because it would involve huge additional costs of moving post out of London in lorries and vans. I hope that there is still room for discussion on that and that we will be able to prevent it from happening.

What I am trying to say is that change is taking place and there is a changed attitude. Therefore, there is now no reason why the new Government, with the right support from those on the Opposition Benches, could not create a Royal Mail, minus its pension deficit, that has the kind of support that will give it sustainability and allow it to compete with anyone else in the world. The Bill, as it stands, contains so few safeguards. How sad it is that we could end up with our famous, wonderful Royal Mail, which has had so many loyal workers over many years, is a lifeline to people in rural communities and is seen by many people living in isolated communities as the one bit of contact that they have-in the form of their postman or postwoman-end up in the hands of a foreign owner. It is not just that that ownership is foreign. They will hand our precious asset over, out of the public sector, and for what? I saw no argument for it. There is no argument.

The changes are already happening; we have a work force who realise that things need to change and they are changing. I cannot believe that some of the Liberal Democrats are going along with this, although I accept that they want to see the support for the post offices. I welcome again that support for those post offices, but it is a separate issue that should be happening anyway. I urge my party not only to oppose the Bill, which we are, but to say that we were wrong to move for semi-privatisation, because it has allowed us to go this way and has allowed the Government to pick up from where we left off.

27 Oct 2010 : Column 379

The Communication Workers Union is signed up to all the modernisation, but we do not want to see a service that is stripped back to the minimum, getting rid of the second deliveries and a number of such issues, as well as posing an overall threat to the universal service obligation. The public do not want this and they will not let it happen. The coalition Government are taking on public opinion at their peril.

4.1 pm

Jonathan Lord (Woking) (Con):
I had hoped to make my maiden speech last Friday on my private Member's Bill, to pay homage in some small way to the great lady, the former Member for Finchley, who famously made her maiden speech on Second Reading of her successful private Member's Bill. I am grateful to colleagues on both sides of the House for giving it its Second Reading without objection, and I am happy today to support the Second Reading of this Bill.

Let me begin by thanking my predecessor, Humfrey Malins, for his long record of service to his constituents and to this House. He was an extremely assiduous constituency MP for Croydon, North-West and then for Woking. He was listened to with great interest in this House, particularly on home affairs, on which he spoke with the legal experience of a solicitor, a district judge and a Crown recorder. He was a shadow Minister for immigration and asylum for five years, and I believe that it is typical of the man that when he lost his seat in Croydon in the general election of 1992, he immediately set about founding the Immigration Advisory Service, which to this day provides free legal advice on matters of asylum and immigration. In 1997, he was re-elected to Parliament as the MP for Woking and received a CBE for his services to immigration policy.

Humfrey was extremely well liked by his constituents and, I believe, by Members on both sides of the House. He remains a great lover of sport. Having played against the All Blacks in his youth, he went on to found and captain the parliamentary rugby union team and later captained the parliamentary golf society. There are many fine golf courses in the constituency of Woking, and I hope that Humfrey keeps up his many friendships in our town and in our villages by playing them as often as possible.

My constituency of Woking has an ancient past but a passion to succeed in the present. Although it boasts the ruins of Woking palace, which was one of Henry VIII's favourite hunting lodges, it came into being as a modern town by Act of Parliament. In the 1840s, London's churchyards were running out of burial space, so the Metropolitan Interments Act 1850 forbade any further burials in London and encouraged the building of cemeteries outside the city. A further Act of Parliament in 1852 set up the London Necropolis Company, which went on to purchase 2,000 acres of land at Brookwood in Woking.

Brookwood cemetery remains a beautiful and tranquil place, a place of truly national significance and importance. I believe that it is worthy of more support both locally and nationally. One of those interred there was Dr Gottlieb Wilhelm Leitner, an oriental scholar who was reputedly fluent in 50 languages. In 1889, he founded the Woking Shah Jahan mosque, which was the first purpose-built mosque in western Europe. For many years, it was the focus of the development of Islam in this country. I 27 Oct 2010 : Column 380
celebrate the fact that Woking has its first Asian mayor, Councillor Mohammed Iqbal. I pledged with him to serve the residents of our borough, and in particular our British Muslim population. It is worth noting that Dr Leitner, the founder of the first mosque in England, was Jewish. That is an interesting and wonderful thing that we should bear in mind as we seek peace and reconciliation in the world.

H. G. Wells was another famous citizen of Woking. On one of my first home surgery visits, I visited a modest, semi-detached villa in the heart of Woking, only to be told that it was the very house where H. G. Wells had penned "The War of the Worlds", which envisaged Martians landing on beautiful Horsell common and laying waste to the whole of Woking and, indeed, vast swathes of southern England. We now celebrate H. G. Wells's imagination with a large, modern, Martian tripod sculpture in the centre of our town.

While we are proud of our Victorian, literary and cultural heritage, we also look forward to the future. Woking borough council is innovative and has an acknowledged national reputation for leading on green issues and renewable energy. Our businesses strive to succeed-none more so than McLaren, which, building on its success in Formula 1, is now an even larger enterprise that is going to build a sports car for the road. I would very much like to own one of McLaren's new sports cars, but unfortunately my parliamentary salary and my wife forbid it.

Woking has a vast panoply of charitable organisations, all of which are willing to make the big society a success. It is a great honour to represent Woking in Parliament, and I hope to do so for many years to come-

Madam Deputy Speaker (Dawn Primarolo):
Order. I am sorry, but the hon. Member's time is up.

4.7 pm

Mr Mike Weir (Angus) (SNP):
I congratulate the hon. Member for Woking (Jonathan Lord) on making his maiden speech. I have been to Woking only once, and he missed out its most famous citizen-the great Paul Weller.

Turning to the matter at hand, although our amendment was not selected, it sets out the feeling of the Scottish National party, Plaid Cymru and all the parties from Northern Ireland, including the Democratic Unionist party; although DUP Members did not sign the amendment, they support its aims. We fear for the future of the universal service obligation if the Post Office is privatised.

I contributed submissions to Richard Hooper's original work. I agreed with much of what he said in the end, but I strongly opposed the part-privatisation proposed by the previous Government and absolutely oppose the full privatisation proposed by this Government. Today, the Business Secretary argued that regulation will protect the universal service guarantee and that there is therefore no need to maintain Royal Mail as a public company, but it is inevitable that the pressures from a fully private company will lead to a reduction in the universal service.

Over the summer, the Business Secretary appeared to recognise that the current six days a week pick up and delivery service may not survive and suggested that a 27 Oct 2010 : Column 381
five days a week service might be sufficient. That accords with the current definition of the universal service, which does not include Saturday deliveries, so the Government already envisage the service declining. That position was justified on the grounds that it would not discriminate against any area, since it would be the same service whether someone resides in Kensington or Kyleakin. However, that is not quite the case. If I reside or run a business in Kensington, I am sure that there are a number of different services to which I can turn, but it is somewhat different in rural areas of Scotland where Royal Mail is the only service that will pick up and deliver mail. That vital point must be borne in mind when we consider the Bill's proposals.

We are dealing not only with residential customers but with business customers, many of whom, in more rural and remote areas, rely absolutely on Royal Mail, which is the only carrier that is obliged and able to deliver a service to them. Does anyone really believe that that will continue in a fully privatised environment? How long will it be before a private owner such as TNT or Deutsche Post argues that it is at a competitive disadvantage because it is the only company required to offer a universal service? How long will it be before it wants the agreement to be watered down or requires public subsidy to enable it to continue?

Such an outcome would be a disaster for rural business. Only this week, the Government talked about the need to increase broadband access in rural areas. All too often Royal Mail is considered old-fashioned-it is seen as Postman Pat and his black and white cat touring Greendale as opposed to the brave new world of broadband. Although broadband is important in rural areas, which would benefit enormously from faster access, one cannot send goods down a telephone line or a fibre optic cable. Unless some entrepreneur in this brave new world comes up with Star Trek transporters, we will still require a physical delivery service to go up and down dale and glen to pick up and deliver physical objects. At the moment, the only company that will guarantee to do that is Royal Mail. We have to take that on board and do nothing that will undermine the service if we are to encourage the regeneration of our rural areas and create jobs in the new green economy.

I appreciate that many Government Members firmly believe in the overriding primacy of private enterprise, but even private enterprise sometimes needs public help. I was intrigued by the Prime Minister's speech to the CBI earlier this week in which he said that

I do not often agree with the Prime Minister, but I think that is absolutely correct. He recognises the need for substantial public investment in the infrastructure needed to help businesses develop. Infrastructure is not just roads, railways and broadband-it is also investment in existing systems that provide a backbone for many businesses. Infrastructure assets such as Royal Mail provide new entrepreneurial businesses in many of our rural areas with an essential service that enables them to operate, grow and create jobs. They do that in many areas that are about to be hit very hard by the reduction in public sector employment.

27 Oct 2010 : Column 382

I am interested in the fascinating myth-busters leaflet published by the Department for Business, Innovation and Skills.

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):
It is good.

Mr Weir:
Indeed. Let me quote one of the myths in the leaflet:

"Growth in parcels from online shopping will outweigh falls in letter volumes".

The response states:

"The parcels market is much smaller than the letters market and has been fully liberalised since 1981, making it highly competitive."

It might be highly competitive, but many carriers will not deliver to remote and rural areas, particularly to Scottish islands, except at immense cost. There is a real danger in going down the route of privatising postal services.

Mr Alan Reid (Argyll and Bute) (LD):
The Bill mentions, in clause 30:

"At least one delivery of letters every Monday to Saturday...to the home or premises of every individual...in the United Kingdom"

at a uniform price. What better guarantee than that does the hon. Gentleman want?

Mr Weir:
I remind the hon. Gentleman that in the summer his Business Secretary said that the service might go down to five days a week, so he recognises that it might be reduced. He also said that European regulations rightly ask only for a five day a week service. Any privatised service will inevitably want to cut costs and there will be pressure on the Government to allow that.

Several hon. Members rose -

Mr Weir:
I shall not give way again; time is getting on.

I pointed out in an intervention that the chief executive officer of Royal Mail is calling for an overhaul of the regulatory regime, including the ability to price products freely, to put limitations on the products covered by the universal service obligation and for the USO fully to cover its costs-the cost of delivering a letter to the islands of Scotland is about £30 not 30p-and for restrictions on access to the Royal Mail network by competitors. If a privately owned Royal Mail goes down that route, the pressure on the Government and regulators could be immense and could mean a substantial rise in postal costs to rural areas. It would be the ultimate irony if the Bill meant that a privatised Royal Mail was given an ability to compete against other privatised companies that it was denied when it was a public body.

I should like to say more about post offices- [ Interruption. ] I would take another intervention if it gave me two more minutes. The Business Secretary failed to explain how mutualisation would work. He failed to say how a post office that has moved into a branch of WH Smith, as many have, will form part of a mutual. How will individually owned-

Madam Deputy Speaker (Dawn Primarolo):
Order. Time is up. [ Interruption. ] Will the hon. Gentleman resume his seat? I ask Members to stick to six minutes. 27 Oct 2010 : Column 383
Interventions with four seconds to go can give more time, as has just happened, and the hon. Gentleman benefited from that.

4.16 pm

Dr John Pugh (Southport) (LD):
The powers that be in the Whips Office approached me last week to ask whether I would like to speak on the Bill, and then a few days afterwards they asked which side I intended to speak on. I reassure them that I shall speak largely for the Bill.

The Government are to be congratulated on introducing a Bill on postal reform. I accept that stagnation is not an option. The pension deficit is crippling. The regulatory environment is crazy, as many Members have established. The communications market is changing dramatically, and the work force are confused and demoralised.

The last time I spoke on postal services in this place, I did so on behalf of employees in my constituency who were locked in battle with the local management. I must admit that like other Members I did not find the Crozier-led management easy to deal with. Nor did I find the union especially helpful, although I have a generally high opinion of the Communication Workers Union and of Billy Hayes in particular. The battle was over an astonishingly high rate of dismissals and disciplinary actions taken against a work force who are neither work-shy nor particularly militant.

A pattern of petty penalisation and unreasonable demands had emerged, and it needed to be dealt with. Otherwise decent staff were being punished for not fulfilling unreasonable schedules, or for simple lapses of concentration, such as not wearing their cycle helmet at the right time in the right place, or for not following procedures with absolute accuracy. In some cases, that became the basis for dismissal, and bit by bit, long-term staff were replaced by casuals. I came to the conclusion that the management wept no tears at all about that, and that the dismissal of long-term, high-pension staff was in fact relatively welcome.

I came to the conclusion that unreasonable schedules were being set-almost wilfully-because Royal Mail believed that the only way it could compete was to ask staff not only to go the extra mile, but to go another and then another. I draw no comfort from the current agreement whereby Royal Mail is to beef up massively the junk mail element in every postbag. A business that plans to survive by giving its customers more of what they do not want does not seem to have much future. That is why something has to change, and there is a lot in the Bill we should welcome.

We need to do something about the insanity of postal regulation. For years, Postcomm has forced Royal Mail to upstream and downstream prices to subsidise its competitors. The line is, "Let the poor old Royal Mail struggle with the long paths, the dogs, the gates that fall off their hinges, the flats with no visible means of access and the long country roads." While Royal Mail does that, the private market looks at what is actually profitable.

Payment for the final mile has been derisory, and as the hon. Member for Vauxhall (Kate Hoey) would point out, it is due to the bloodless application of EU law and directive that has done untold damage to the postal system of the UK. I do not want to go into the rationale for that; suffice it to say that as a consequence 27 Oct 2010 : Column 384
of the single market agreement that Mrs Thatcher introduced-or got Parliament to agree to-we are stuck with it. But as far as I can see from the Bill, we are not stuck with Postcomm. That is a significant improvement. I welcome, too, the emphasis on employee share ownership.

Jack Dromey:
Does the hon. Gentleman share my concern that there is nothing in the Bill that would prevent ownership passing to private equity, perhaps aided by the hedge funds, and a takeover not in the national interest, including potentially by foreign ownership?

Dr Pugh:
The hon. Gentleman is assuming that the Bill is totally finished business. If he has amendments that he feels ought to be tabled and that ought to impress the Minister, I am sure he will have the opportunity to do so.

Not only is employee ownership part of Lib Dem policy, but it is a long-standing part of Liberal policy before that, as many of my hon. Friends will recognise, and it was backed by candidates in the recent Labour leadership elections. It is good to see employee ownership in the Bill. It is 10%, but it is there.

I welcome the central place in the Bill given to retaining the universal service obligation and the measures taken to secure it. We all hope that they will be good enough.

I welcome the plans for the Post Office, but with some caveats. It is a huge franchise and it still has huge potential, but it remains the case that there is virtually nothing that it now does which cannot be done in some other way. Its viability depends on elderly customers preferring to do things in a traditional way, via paper transactions. It needs more than the good wishes of the House, the occasional subsidy and a more modern and diverse facade. It is a very distinctive type of franchise, unparalleled in any other European country, and it needs a distinctive role.

That can only be through an enduring link with the Government or with the community that post offices serve. It is not clear to me yet what long-term role the Government or the community wants the Post Office to discharge. My fear is that if central Government, local government and the community cannot identify that role, the franchise will lose its universal service provider status and part of its raison d'être. The Government need to work out what they want a sustainable post office network to do. We cannot have, as we have had in the past, some Departments promoting it and others, such as the Department for Work and Pensions, effectively sabotaging it.

I fear there is also an element of backdoor sabotage. I have had difficulty in my constituency, where sub-postmasters have tried to sell franchises to somebody else and have encountered untold difficulties in seeking to do that and prohibitive prices presented to buyers.

The fundamental issue that we are facing is privatisation. Some people approach the subject with a presumption against privatisation, and some have a presumption in favour of privatisation. I guess most of us are fairly pragmatic about it, but do we accept that the safeguards of the universal service obligation are robust? If we accept that there is an argument for the Government to absorb the pension deficit, and if we accept that the 27 Oct 2010 : Column 385
business will go better with sane regulation and employee involvement, the big question is why not retain the business in public ownership. That is the issue on which we will torture ourselves over the next few days. We hope that we will have from the Minister an exhibition of evidence-led policy where the balance of argument prevails, not the balance of numbers.

4.23 pm

Mr Adrian Bailey (West Bromwich West) (Lab/Co-op):
I start with a declaration of interest. I am a Labour and Co-operative Member of Parliament, with an 18-year involvement with the Co-operative movement prior to coming to the House. Since entering the House, I have at various times been chair of the employee share ownership group and the all-party building societies and financial mutuals group. Philosophically, there are considerable elements of the Bill that I instinctively support. The Government's recognition of the potential role of employee share ownership and mutuality in delivering postal services in this country is welcome. My regret, which forces me to oppose this Second Reading, is that the Bill's other parts will militate against the successful implementation of either employee share ownership or mutuality.

My experience within the movement has demonstrated a couple of things to me. We cannot legislate for mutuality. We can set up a framework of legislation in which mutuality can thrive, but we cannot look at a business and say, "We will make that a mutual." Mutuality and co-operation have to stem from the desire of those who work within an organisation to work in a certain way, driven by a certain culture. That culture may exist in Royal Mail and in the post office service, but the issue has not yet been determined.

I welcome the consultation on the Bill with the co-operative movement, but I did not feel too confident when the Secretary of State seemed not to know whether it had taken place with Co-operatives UK or with the Co-operative Group. The fact that he fails to understand the difference between the two does not exactly reassure me of a heavy commitment to that line of organisation.

As the hon. Member for Northampton South (Mr Binley) said, the previous Business, Innovation and Skills Committee examined the Royal Mail and the Post Office and made a range of recommendations, many of which the Minister alluded to, but many of which have not been implemented. That prompts the question that if their implementation is necessary to make the privatised model work, why have they not been implemented while the company has been in public ownership? Indeed, if they had been implemented, it might have made the private offer more acceptable. The Secretary of State did not sufficiently explain that situation.

My fundamental objection to the whole privatisation programme is that it basically instils a contradictory philosophy to that in the mutual and co-operative elements of the Bill. I have not seen it fully explained how the drive for shareholder appreciation and profit will be mitigated to allow for the regulatory and social obligations of the privatised Royal Mail. There has been a long debate about the universal service obligation, the six-day delivery and so on, and the fact remains that whoever 27 Oct 2010 : Column 386
buys Royal Mail in the long term will have to satisfy shareholders, but the potentially irreversible drive to make profit must call into question the regulatory framework that we have been assured will contain the privatised industry. That situation will have serious consequences for the post office service.

If the Royal Mail withdraws its current contract at some stage, or under some ownership or model, it could sound the death knell for hundreds, if not thousands, of post offices. Only 4,000 of the current 11,000 post offices are profitable. My right hon. Friend the Member for Southampton, Itchen (Mr Denham) said that mutuals can fail, and in this context there is a high possibility of failure.

Chris Evans (Islwyn) (Lab/Co-op):
I hear what my hon. Friend says. Does he not agree that for a mutual to be successful, it needs to have a viable business plan, which the Bill does not include?

Mr Bailey:
Exactly. That will be one of the determining factors in whether post office sub-postmasters and other employees want to work within a mutual framework. The fact remains that Royal Mail, driven by an imperative to make more profit, will be bound to re-examine some of its contracts with the Post Office, and there is no guarantee that they will be sustained. About a third of Post Office Ltd's total income is dependent on those contracts with Royal Mail, and that creates a degree of uncertainty and risk that could well work against those involved in the Post Office being prepared to accept a mutual organisation.

Damian Collins (Folkestone and Hythe) (Con):
Listening to the hon. Gentleman's remarks, one might think that the post office network has gone through a halcyon period. What guarantees were there for the thousands of postmasters who saw their businesses close over the past few years?

Mr Bailey:
I do not recall anybody saying that post offices had gone through a halcyon period, but under the last post office reorganisation many sub-postmasters applied for the compensation package that was agreed for them. I very much doubt that that would still be available under a revised and privatised process.

Jesse Norman (Hereford and South Herefordshire) (Con):
The hon. Gentleman says that it is impossible to create mutuals from a transfer, but did not John Spedan Lewis create the John Lewis Partnership by transferring a business into an employee-owned trust? Is not that a great example of an existing business being transformed into a highly successful mutual, if not a co-operative?

Mr Bailey:
Certainly John Lewis did that, but he did not just hand it over-there was a process by which he ascertained the willingness of others within the business to accept it. That situation has to be created. I could equally point to the situation in the '70s when co-operatives failed because they did not have that in place.

I oppose the Bill because it is fundamentally flawed. At the Lib Dem conference, the Secretary of State said, "Capitalism takes no prisoners," but since then he seems to have been on a private journey. That is demonstrated 27 Oct 2010 : Column 387
by this Bill, in which he puts forward a solution based on a brand of capitalism that I would describe as cuddly capitalism, whereby shareholders will forgo their private profit in order to embrace a co-operative and mutual solution that mitigates the social impact of their drive for profits.

4.32 pm

Andrew Stephenson (Pendle) (Con):
I welcome the Second Reading of the Bill and what the Secretary of State has said, which has helped to clear up a number of the points that I was going to raise.

I believe that now is the right time for a fresh debate about the future of Royal Mail, particularly the need for radical change in the way that postal services are regulated. There is an urgent need for a review of the regulations that are supposed to govern Royal Mail and the universal service but in reality prevent the company from operating in a truly competitive and open market. None of us doubts the immense service and commitment of the thousands of postmen and women and sub-postmasters across the country who work tirelessly to serve their community. I know of many in my own constituency who consistently go that extra mile not only to do their job but to serve their community in so many different ways. We owe it to these people to ensure that we get this Bill right and that that Royal Mail is given the opportunity to flourish in the future. That opportunity exists now, and we have the chance to do what the previous Government failed to do: to breathe fresh life into a national treasure that would otherwise be crushed by the weight of regulation, strangled by the noose of the historical pension deficit and starved by the absence of capital that is needed to continue the modernisation programme.

As a local MP, I know how important the universal service is; many other Members have touched on that. The one-price-goes-anywhere, six-days-a-week service to the UK's 28 million homes and businesses has been in place since Royal Mail was established, and it is highly valued by the public and by businesses large and small across the country. However, many at Royal Mail would say that that is now threatened because of the way in which regulation is strangling Royal Mail's ability to compete in the wider marketplace. It is also vital to note how important this service is to the men and women working in Royal Mail, who derive a great deal of job satisfaction from this part of their job.

As several hon. Members have pointed out, Royal Mail is in a precarious position: there is no hiding from the facts. Mail volumes are falling, the company has a multi-billion-pound pension deficit, and there is an urgent need for more capital to be injected into the company. I welcome the provisions in the Bill that will allow Royal Mail flexible and timely access to capital in future as it continues its modernisation to provide customers with the services they want.

That brings me to the major issue facing the Royal Mail, on which I wish to elaborate. The company is currently stifled by more regulation than its competitors, so the status quo is no longer an option. The biggest single threat to the universal service obligation, which is protected as part of the Bill, is the unfair regulatory framework in which the Royal Mail currently operates.

27 Oct 2010 : Column 388

Deregulation of UK postal services is long overdue. I can think of no other market or industry in which a state-owned institution such as the Royal Mail is forced to offer its competitors a subsidised rate that does not even cover the cost of its business. As my hon. Friend the Member for Southport (Dr Pugh) pointed out, and as the right hon. Member for Southampton, Itchen (Mr Denham) said in his reply to the Secretary of State, Royal Mail's rivals currently have an in-built price advantage because of the arbitrary and unfair margin that the regulator sets between the price that Royal Mail can charge its own business customers and the price that it charges competitors for the use of its network.

I am sure that the original intention of the regulations on that matter was to help encourage new providers into the market, but it seems somewhat perverse that they now mean taxpayers and Royal Mail customers are effectively subsidising foreign competitors. Those access headroom regulations allow rivals to undercut Royal Mail, no matter how efficient its business becomes. In the interest of fairness, and so that Royal Mail can operate freely and competitively, they must surely be reviewed.

Fiona O'Donnell (East Lothian) (Lab):
Would the hon. Gentleman like to consider the deregulation of bus services, which has not led to an increase in competition? In particular, services and competition in remote and rural areas have been reduced.

Andrew Stephenson:
I thank the hon. Lady for that point. I believe that we need to get the right balance in regulation between protecting consumers and ensuring that we create a stable company. I therefore welcome most of the Bill's provisions, particularly on protecting the Royal Mail's universal service obligation.

We need to get regulation right, and I should like to ask the Secretary of State for any further assurances that he can give the House that the Bill will deliver the open, transparent, fair and competitive postal service market that is needed to allow the Royal Mail to prosper in future. I also ask Ministers to ensure that the Bill allows Royal Mail to introduce new products without always having to consult its rivals publicly for three months, as the current regulations require. That severely limits the company's ability to innovate and compete.

It seems to me that there should be regulation and price control only where there is little or no competition. Currently, 80% of the Royal Mail's revenues are covered by regulation, although rivals handle at least 40% of the mail, and 60% of bulk mail. Personally, I should like competitors to be given access to its network on commercial terms and at a commercial price, rather than the Royal Mail being forced to deliver its competitors' mail at a loss.

The Royal Mail and the Post Office are key national institutions, and we must ensure that they are both on a secure and stable footing. Securing the future of the post office network is absolutely vital to me. Pendle lost 17 sub-post offices under the last Government, including, most recently, six branches in 2008. Many parts of the country fared even worse than my constituency, with the number of post offices decreasing from 17,845 in 2000 to only 11,905 today. I welcome the fact that the Post Office is not for sale as part of the Bill, and that there will therefore be no further programme of closures. 27 Oct 2010 : Column 389
That will come as a huge reassurance to numerous elderly and disabled residents in Pendle who rely on the local post office on a daily basis.

I was encouraged by what the Secretary of State had to say about investing in the network and exploring future business opportunities, and particularly by the £1.34 billion extra that he announced today. I welcome the Bill and fully support the moves that will help the Royal Mail to flourish in an open and competitive marketplace in future. I look forward to supporting the passage of the Bill, with the aim of delivering a strong and stable company for customers, the 155,000 employees, and potential future shareholders.

4.39 pm

Glenda Jackson (Hampstead and Kilburn) (Lab):
Earlier today I passed a lobby outside the House, whose protagonists were carrying placards that bore two messages. The first was "Bash the bankers, not the pensioners", and the other was "Save our services". Indeed, there is a lobby of pensioners in the House even as we speak. The Secretary of State highlighted the fact that post offices are of particular importance to pensioners. However, I thought he rather narrowed the importance of post offices, certainly for my constituents, because post offices are vital not only to pensioners but to people with disabilities, the unemployed and young parents. One must give credit to the new coalition Government, because their record is 100% consistent: despite their pronouncements to the contrary, all their policies attack the most vulnerable and the poorest in our society.

There are no guarantees whatever in the Bill that post offices and sub-post offices will be maintained. It is easy to say that there will be no more post office closures-I am somewhat confused on whether that covers sub-post offices-but without cast-iron guarantees, my constituents will suffer inordinately. All of us who were here in the last Parliament and who are most grateful and humble for being returned remember our struggles to save our sub-post offices. That is certainly true of my constituency and throughout London. I lost four in the last round, and six in the two previous rounds. Such closures impact on more than the individual users of the sub-post office. London is essentially a sequence of small villages, and sub-post offices tend to be a major part of the smaller, local economies. People go to the post office and do a little bit of shopping in their local shops. Once the post office goes, those other shops lose out.

The Government are telling us that the retail sector will be the essential driving force of our growing economy, but if there are no guarantees that essential counter services will be maintained, the economic fallout could be greater.

Jesse Norman:
As it is true that no Parliament can bind its successors, and as we have in legislation a clear statement that there will no further closures, could the hon. Lady specify what guarantees she is looking for that cannot be found in the Bill?

Glenda Jackson:
With all due respect to the hon. Gentleman, his Secretary of State stood at the Dispatch Box and gave categorical assurances that his proposals will revitalise and re-energise our postal services. He 27 Oct 2010 : Column 390
assured us not only that our postal services will not be diminished, but that they will expand and grow, and become more inventive and entrepreneurial. There is an apparent guarantee that national delivery will be set in stone. I asked him how the Government could guarantee for perpetuity a privatisation of postal services without entrepreneurs, who apparently will come rushing in, but the hon. Member for Northampton South (Mr Binley) said that entrepreneurs would run a million miles away from putting money into the Post Office.

The Secretary of State made those guarantees and cast them in stone, so why can he not do that in respect of sub-post offices? I am perfectly prepared to accept changes to post offices up to a point, but all the sub-post offices I know are additions to retail outlets, not the primary source of business for the individuals running them.

The public still firmly believe, despite the vagaries-or worse than vagaries-of the changes to our postal service, that the Post Office is a public service. The people of this country take great pride in it and believe it to be central and essential to their way of life. It matters not how many times one points out to them the decline in the number of letters we write, as everybody would apparently sooner send an e-mail because that is easier. I can understand that, but I am certain that I am not the only Member of this House who despairs of the day when e-mails were invented, because of the time it takes to send and read them. And what do we get at the end of it? I shall not go down that road, but I can see by hon. Members' smiles that my experience is shared universally.

None the less, the public value and treasure the public service provided by post offices, and not only because, as for many of my constituents, it frequently used to be the case-this has improved slightly lately-that the only other human face that some people saw was that of the postman. In many instances, the only people whom they had conversations with were those they met in our sub-post offices. I have come across more than one example of a sub-postmaster missing seeing a particular pensioner over a comparatively short time span and alerting social services and the police because he was concerned that she might have had an accident or that something else might be wrong, and being proven right. Post offices do not simply offer a commercial service, whereby we can communicate with each other via the post; they offer a public service through which the public value each other and, in essence, take care of each other.

This Bill is yet another brick in the wall of what the Government are attempting to convince us will be their big society, if all these policies go through. However, it seems to me that what these policies will produce is the big broken society. If we lose the capacity to care for each other, what will be the point if we do manage to close the national deficit? It is the human beings of this country who are of primary importance. They are the ones who are going to get us out of this mess. Their feelings about public services are not limited to what the Government tell us are their priorities-the NHS and education. Rather, it is the public service in our postal services that they value. As others have said, there are aspects of the Bill to which one can give comparative support, but the Bill as a whole is an unmitigated mess.

27 Oct 2010 : Column 391

4.46 pm

Chris White (Warwick and Leamington) (Con):
Even after listening to the previous speaker, I think that we all share the same view, which is that we have to create a sustainable future for our post service, so that it can both serve our economy and continue to serve as a public good. We should all accept that Royal Mail has been lagging behind its competitors, and, with a potential reduction in the volume of letters of between 25 to 40% over the next five years, despite the use of e-mail and modern technology, we need to find ways to make Royal Mail change with the times. The injection of private capital will help to fund the necessary modernisation, which has already begun, but which needs to continue apace.

However, a more innovative way of achieving rising productivity-one put forward by the Bill-is by providing employees with shares in Royal Mail. Evidence has consistently shown that employees who feel a sense of ownership of a company have higher morale, and are likely to be more successful as a consequence, than those who do not feel that sense of ownership. The employee share scheme will give staff at Royal Mail a real stake in the future of their company and give employees a financial incentive to see improvements in the company and an even larger turnover. Given the clear benefit of that approach, my only regret is that the Government have not made the employee share scheme greater than 10%. However, given the financial constraints and the need to attract fresh investment into Royal Mail, I appreciate that doing so may not be practical. That said, I have some other concerns.

Chris Evans:
Does the hon. Gentleman not think that the best thing would be to offer Royal Mail a mutualisation, as has happened with Post Office Ltd ?

Chris White:
No, I think that the offer as it stands is sensible and practical, although as I have said, it would be better if the level was greater than 10%. However, as it stands, that is the only way that we are going to move forward.

I recognise that the injection of private capital has been sought in order to protect the universal service obligation, although I would like to use this opportunity to state how damaging it would be for communities and small businesses if Royal Mail dropped the USO. I understand that there are considerable costs involved. However, for many communities-particularly rural communities-and a vast number of small enterprises, Royal Mail is an important lifeline, with nearly 60% of small businesses wanting to continue to receive mail deliveries six days a week. Given that the small and medium-sized enterprise sector will play a large part in our economic recovery, we should avoid any changes to the USO that might damage growth or hamper development in that part of our economy.

The future of Royal Mail is not the only concern for communities and businesses, however. People also want a strong future for our post offices. In the past few years, post offices have closed in many communities, including my own, and those vital local amenities must be protected. If they are to survive, they must become more than simply a place for posting or holding letters.

27 Oct 2010 : Column 392

The Post Office already needs a subsidy of around £80 million in order to carry out its functions, and this will increase if other income streams are not found. I believe that a Post Office bank offers a real solution and could provide a strong future for our post offices. About 25% of small businesses bank with the Post Office's financial services, and I am confident that more would do so if the limited number of transactions that they are able to make could be expanded. A survey by the Federation of Small Businesses showed that nearly 40% of its members were in favour of a Post Office bank and would bank with it. The present arrangements mean that 50% of the profits made on financial services provided by the Post Office leave the Post Office business, and that is simply not sustainable. Moreover, the joint venture with Bank of Ireland has not been able to deliver the basic, core banking products.

An independent Post Office bank would bring banking right back to the centre of our communities and help to revive trust between the public and the banking sector. A Post Office bank would help small business, and thus our economy, and it would provide those who have difficulty accessing the high street banks with an opportunity to get hold of basic financial services, helping the most vulnerable in our society. In many of the poorest areas, people have lost access to traditional forms of banking, and a Post Office bank would provide a trusted face and a chance for those communities to use the financial services that many of us take for granted.

Such a bank would not be unique to Britain. The French postal service launched its bank in January 2006, and, by 2007, it had 11 million postal banking accounts providing significant revenue. The Italian postal service, Poste Italiane, launched BancoPosta in 2000. By 2002, Poste Italiane had shown a net profit for the first time in 50 years. So it can be done; it is just a question of putting the framework in place to achieve it.

Mr Anderson:
Will the hon. Gentleman give way?

Chris White:
I am sorry, but I will continue if I may.

A good postal service and a strong network of post offices is not a luxury; it is a necessity, for economic and social reasons. We need to be innovative and bold, and we need to think about sustainability. I am confident that this legislation will move Royal Mail and our post offices in the right directions, and I look forward to supporting it in due course.

4.52 pm

Mr Pat McFadden (Wolverhampton South East) (Lab):
We have had many debates on post offices and Royal Mail in the House over the years, and we have often concentrated on the competition regime governing the different mail companies that are engaged in the delivery of mail. Less often, we have concentrated on the technological shift away from all mail companies to new technologies, including text messaging and the use of the internet and e-mail, to which my hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) has just referred. This is a fundamental shift, and it lies behind many of the problems that Royal Mail now faces. Perhaps it is natural to concentrate on the things that we believe we can change, but just because we cannot change that technological shift, it does not make it any less real or any less fundamental to the challenge being faced by our post offices and by Royal Mail itself.

27 Oct 2010 : Column 393

All this is not necessarily bad news for Royal Mail, because there is a growth in fulfilment mail, as it is called, as well as in internet shopping and in selling things through eBay. However, Royal Mail's business needs fundamental modernisation if we are to keep the universal service obligation and the six-day-a-week delivery service that lies at the foundation of our postal system.

There are some areas of the Bill with which I can agree. The Secretary of State attempted to say that it was much the same Bill as the one proposed by the previous Government, but it clearly is not. They have some areas in common, however. The Government taking on an historic pension deficit-and, indeed, the way in which they are taking it on-is something with which I can agree. The taking on of both the assets and the liabilities puts postal workers on the same basis as nurses, teachers and so forth. This method was attacked by the previous Conservative Opposition as a raid on the pension fund, but I am glad to say that, now they are in government, they have turned their backs on that position and adopted the method we proposed.

Similarly, when it comes to regulation, it is right to move from Postcomm to Ofcom and regulate mail services in the wider context of communications technologies. Regulation, however, is about more than the heading on the notepaper or the address of the building. It is also right to put at the heart of the regulatory system the maintenance of the universal service. This Bill, like Labour's Bill, has a reserved power for a levy to support universal service. In his report, Richard Hooper was sceptical about the need for this, seeing it perhaps as an excuse for modernisation not to proceed. We felt it was right to take such a power to ensure the maintenance of the universal service in the future.

So much for areas of agreement. The fundamental area of difference is on ownership. Clause 3 of Labour's Bill said:

"Each Royal Mail company must at all times be publicly owned."

Anyone wanting to see the difference between our proposals and this Bill need only scan the present Bill to try to find such a clause-they will not find it. That clause meant that any private investment had to be on a minority basis. The idea of having a minority stake was not particularly new; it had been floated as far back as 1998. Why keep a majority public stake? It gives the taxpayer an ongoing interest in the maintenance of the universal service obligation and an ongoing interest in the inter-business agreement, which is so essential to the post office network. Even more important than those two elements, however, it also gives the taxpayer an ongoing interest in the transformation of what is, after all, a public service. The taxpayer is taking on the historic pension deficit and the liabilities therein, so why should not the taxpayer share the upside of the modernisation that the Bill is designed to achieve? That explains the logic behind keeping a majority stake in taxpayers' hands.

All that has been cast aside by the Government. Our Bill was a proposal for partnership; this Bill is a proposal for privatisation. On employee shares, yes, we were in favour of that, too, but again, only in the context of a company that would remain majority-owned by the 27 Oct 2010 : Column 394
taxpayer. What guarantees are there for the universal service obligation, the inter-business agreement and the taxpayer sharing in the upswing envisaged by the Bill?

Finally, there is a lesson for Labour Members, too. My hon. Friend the Member for Vauxhall (Kate Hoey) said that we should not have introduced our Bill. I offer the opposite lesson, however, as the truth is that if we had managed to get our Bill through, we would have had a publicly owned Royal Mail and might not have had to face the measure before us. There is a fundamental difference between what we were proposing and what is before us today. That difference is a majority publicly owned Royal Mail-a difference, I suggest, that is worth having.

4.59 pm

Mr Alan Reid (Argyll and Bute) (LD):
I represent a constituency with many small, remote communities, including many islands. Clearly, Royal Mail and the Post Office are vitally important to that constituency. I have to admit that when privatisation was first mooted, I certainly questioned it. However, I am now convinced that it is the only way forward because of the state of the finances of both Royal Mail and the Government more widely. Thus, private capital provides the only way of investing in the modern plant and machinery that Royal Mail so desperately needs. Given the huge mountain of debts that the previous Government left behind, there is simply no alternative.

Jim Shannon (Strangford) (DUP):
One of the proposals involves the returned letter centre in Belfast, which employs 26 people. It is the most efficient returned letter centre in the United Kingdom, so the proposed changes cannot be to do with efficiency. As for savings, where are the savings in such a move?

Mr Reid:
I am afraid that I do not know the details of what is happening to Royal Mail services in Belfast, so I shall have to pass on that, but the Minister has an hour and a half in which to find out the answer.

As I was saying, there simply is no alternative to private capital. Royal Mail is in a very difficult position. As other Members have pointed out, there is competition not just from other mail companies, but from other means of communication such as the internet and e-mail. As we heard from the right hon. Member for Wolverhampton South East (Mr McFadden), the former postal services Minister, the last Government concluded that private capital was required. There are clearly differences of opinion on whether there should still be a majority Government stake or whether the Government should have the power to sell off more than half the business, but I think that we should give the Government the power to sell off as much of the business as they consider necessary. We should bear in mind that the Bill does not mandate the full privatisation of Royal Mail, but merely gives the Government that power. I believe that we should give them the flexibility that they require in these difficult economic times.

Mr Anderson:
Would the hon. Gentleman apply the same logic to other parts of the public sector such as the health service or defence? If the logic hangs together when applied to this service, why should it not do so when applied to those other services?

27 Oct 2010 : Column 395

Mr Reid:
Those are completely different examples. If the question arose in the hon. Gentleman's constituency of allocating public funds to a scanner for his local hospital, to the troops in Afghanistan or to a sorting machine for his local sorting office, I think a survey would establish that the scanner and better equipment for the troops in Afghanistan would rank high in the pecking order. Because Royal Mail is operating in a competitive market, it is important for it to secure private sector expertise. The health service is a national health service for the whole country, which is why it should be in the public sector.

It was the last Government who introduced competition to the mail business in their Postal Services Act 2000. However, the structure that they created allowed private companies to cherry-pick the most profitable parts of the business, while leaving Royal Mail to deal with the expensive part-delivering to remote parts of the country. Royal Mail is now suffering as a result of the unfair competition created by the last Government's regime, and I am pleased that the Bill will allow Ofcom to remove much of that unfair competition.

Under the last Government, all that we saw was worsening service. Opposition Members seem to have forgotten that. It was not the fault of the postal workers, but the fault of the competition regime that the Government had created. Mail is now delivered much later in the day than it used to be, Sunday collections have been abolished, and stamp prices rise every year by far more than the rate of inflation. Worst of all, thousands of post offices have closed. I was delighted by the announcement today of a vital £1.3 billion of new funds for the Post Office.

Chris Evans:
Will the hon. Gentleman give way?

Mr Reid:
No. I am afraid that I have already taken the two interventions that I am allowed.

The Post Office is extremely important, and it is also important for the whole Government to back it. Given that it has branches throughout the country, it is in an ideal position to deliver Government services. I hope that we shall not see from this Government some of the silo thinking that we saw from the last Government. I am thinking particularly of the Department for Work and Pensions. Owing to the way in which government is structured in Departments, there is often an incentive for silo thinking, and for looking only at an individual Department's budget and not the wider budget. I can understand the pressures on the DWP to cut costs and therefore perhaps to allow services such as the payment of pensions and benefits to go to a competitor that does not have as wide a network as Royal Mail and the Post Office, but I hope that those pressures will be resisted, that the whole Government will back the Post Office, and that in particular when considering the contract for the payment of benefit cheques, the DWP will continue to give it to the Post Office. Any other private sector competitor does not have the same widespread network.

The key test of whether I would support the Bill was always going to be, "Does it protect the universal service obligation?" The Bill clearly passes that test. I intervened on the hon. Member for Angus (Mr Weir), because he clearly had not read the Bill. I draw his attention to clause 28(1), which states:

"OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service",

27 Oct 2010 : Column 396

and to subsection (2), which states:

"the power of OFCOM to impose access or other regulatory conditions is subject to the duty imposed by subsection (1)."

That is the USO.

Mr Weir:
Will the hon. Gentleman give way?

Mr Reid:
Very briefly, because I will not get an extra minute, as the hon. Gentleman did following my intervention on him.

Mr Weir:
The point I was making is that we have a six-day service now, that the Bill guarantees only a five-day service and that the Business Secretary seemed to think that that was sufficient.

Mr Reid:
The Bill requires

"At least one delivery of letters every Monday to Saturday-

(a) to the home or premises of every individual or other person in the United Kingdom".

The hon. Gentleman is getting confused between the Bill and the European directive. The directive guarantees only five days. What the Secretary of State has been saying is that he already has the power under the European Communities Act 1972 to reduce the service to five days, by order, but he has no intention of using it because the Bill guarantees six days. I encourage the hon. Gentleman to read clause 30.

I am also delighted that clause 44 allows Ofcom to impose a duty on other mail operators to make a contribution towards the cost of the USO if that is necessary. I have been campaigning on that for many years. The previous Government resisted it and I am delighted that this Government have put that in the Bill.

I support the Bill and congratulate the Secretary of State on bringing it forward. I believe that it covers all angles and that it will deliver sustainable postal services in all parts of the country.

5.7 pm

Mrs Sharon Hodgson (Washington and Sunderland West) (Lab):
Reform of the UK's postal services was in the manifesto of both the Conservative party and the Liberal Democrats, so it should come as no surprise to anyone in the Chamber that we are considering this Bill so early into the coalition's temporary tenure on the Government Benches. What will be a surprise to voters is that, rather than merely allowing for an injection of private investment, the Bill paves the way for a complete sell-off of that vital public service. That goes way beyond what the Liberal Democrats were elected on; they proposed selling 49% to private investors, which is too high for my personal tastes, but at least not a dominant stake.

I have had a look through the Tory manifesto, which is imaginatively named "Invitation to Join the Government of Britain". I think that the public were led to believe that that was an invitation to them, but as it turned out it was just to a dozen or so Liberal Democrats. From glancing through that fascinating read, it appears that "the post" got lost in it. I see references to Ministers taking posts, to first past the post, and even to the "Post-Bureaucratic Age", whatever that is. What I do not see is a commitment to postal services, or a pledge to allow the complete sell-off of Royal Mail. Indeed, the majority of voters for both branches of the current Conservative party on the Government Benches do not 27 Oct 2010 : Column 397
support the sell-off of Royal Mail. As both parties have already shown, however, pre-election promises and pledges are not worth the paper they are written on. Therefore, I am sure that their electorates will be getting used to being treated with contempt.

As the now Business Secretary once said about the last Labour Government's vital bail-out of the financial sector, this proposal looks like the Government are intending to privatise the profits of a public business and nationalise the losses. I know that many of his colleagues in the yellow branch of the Conservative Party agree with me on that. I am also concerned that once the Royal Mail is privatised it will be another institution that is deemed too big to fail. In the event of a potential investor running out of cash in what remains a fairly unstable worldwide economy, will the Government be forced to step back in and assume control of Royal Mail, thus soaking up a second tranche of liabilities? Of course, I am not saying that the Royal Mail should ever be allowed to fail, but the Government can guarantee that that never becomes an issue only by ensuring that a significant majority stake remains in public ownership.

On the separation of Royal Mail and the Post Office, there is no international precedent for separating a national main mail operator from its retail arm. Therefore, the Government are in effect taking a stab in the dark-the latest in what looks like a long line of gambles with the future of our country.

Clause 33 gives Ofcom the power to review the universal service obligation. In the event of complete privatisation, the large private company or consortium of companies would undoubtedly have a slick and well-funded lobbying operation, which they could deploy to press Ofcom to change the terms of the USO, potentially resulting in the loss of a delivery day.

Jim Shannon:
Does the hon. Lady agree that our current six-day service, with the delivery tomorrow of first-class post that is posted today, might change under the new regime, meaning that on a cold, wet, windy day people in Kilmood, Cloughey or Buckna would not get their delivery?

Mrs Hodgson:
I do agree. A lot of things that we now take for granted would be under threat, including that.

Several members of the new Government were fairly open prior to the election about their contempt for Ofcom. It is not for me to speculate as to why that might be, but it appeared to coincide with the acquisition by the Tories of a certain powerful new patron who shares that contempt. At any rate, the chances of No. 10 backing Ofcom on maintaining the six-day delivery week, or of even imploring Ofcom to maintain it, seem fairly slim. Can the Minister today give a guarantee to the House that Ofcom will not be leant on from any quarter-or, better still, will he undertake to remove the flexibility entirely at a later stage of the Bill's proceedings?

I realise that many other Members wish to speak, so I will limit the length of my remarks. The majority of Members recognise that reform of postal services is needed to secure the long-term future of Royal Mail and to maintain the universal service obligation, but the Government have no mandate to introduce the Bill as currently drafted. Allowing the sell-off of Royal Mail is 27 Oct 2010 : Column 398
not wanted by my constituents and nor is it wanted by many Members on both sides of the House or the wider public. It is certainly not wanted by the employees, even with the promise of bunging them a few shares as a sweetener. The only people who do want it are the potential investors and their friends on the Treasury Bench. The interests of this narrow constituency do not justify the Government's taking an ideological sledgehammer to a nut that does not necessarily need to be cracked.

5.13 pm

Richard Graham (Gloucester) (Con):
I am conscious that we all come to this debate with our own scars of individual experience. Mine came in the ward of Kingsholm, a few hundred yards from where the Domesday Book was written, in my constituency of Gloucester. There, only two years ago, I watched my predecessor pose beside photographers while standing under a banner that proclaimed, "Save our post office", but then vote in this Chamber against a motion to halt post office closures. The hon. Member for Hampstead and Kilburn (Glenda Jackson) said that she was concerned about the prospect of a big broken society. What I saw that day in Kingsholm was the very model of a big broken Government.

I did not take up the position of secretary of the all-party group on post offices to sit in the Chamber and watch another programme of 5,000 post office closures be passed. I have always believed that the best way forward is through a combination of much greater investment in Royal Mail, which handles the sorting, delivery and collection, and greater commercial freedom for post offices, which are independent small businesses; they are franchises and they need to be able to channel more services to our communities over their counters.

Jesse Norman:
Is it not fair to say that the Government are making an attempt in very good faith to reshape the commercial conditions of the Post Office, which includes the removal of the pension obligation, the creation of greater employee ownership and a liberalisation in the market? Is it not that combination that will give the Post Office potential to grow and thrive?

Richard Graham:
My hon. Friend is absolutely right, and what he describes is precisely why he and I welcome what the Secretary of State said. I also pay tribute to the detailed work done by the Post Office Minister before this debate.

Interestingly, the right hon. Member for Southampton, Itchen (Mr Denham) called for a Postal Services Bill lite. It would be lite in every way when it comes to investment because by trying to insist on Government retention of a majority stake-precisely what the previous Labour Government proposed in their Bill, which they unfortunately failed to take forward-he is condemning Royal Mail to not being able to get that investment. No private investor would be able to match the sort of investment in Deutsche Post, to which I alluded, of £15 billion unless they had a controlling stake in the company.

As we have heard, the Bill makes it clear that the Hooper report's essential demand for greater investment and modernisation, despite the progress made in the modernisation agreement between Royal Mail and the Communication Workers Union, is vital to the future of 27 Oct 2010 : Column 399
this great British asset. The Labour party has not left this Government the luxury of providing that investment themselves. We can provide it only by attracting it from the business sector.

Jake Berry (Rossendale and Darwen) (Con):
Does my hon. Friend agree that the best way of bringing such investment into the company is this privatisation? Does he also agree that this may bring with it the rigours of the private sector in terms of efficiency?

Richard Graham:
My hon. Friend makes a very good point, and I think that he, like me, would support the new chief executive of Royal Mail, who is taking steps in precisely the direction he describes.

My second point relates to the expansion of opportunities for our post offices, which hon. Members on both sides of the House agree are such a vital feature of our communities. The Bill paves the way for a much greater opportunity for post offices to be Government front offices, offering them as outlets for services for those in our communities, especially people who do not use the internet. That could include the certification of documents, hard copy form applications and access to all our banks, which I shall discuss in a moment. I very much look forward to the newly formed Gloucestershire Credit Union's services being available to the poorest and most vulnerable in Gloucester through our post offices.

There is still work to be done by all parties involved, and I wish to make several specific recommendations. First, the Government should be able to confirm as soon as possible that the Department for Work and Pensions will renew the green giro service or the access to benefits in our post offices for communities. Secondly, Ofcom should agree a significant increase in the current 12p to 14p pricing of the final mile of delivery, which has been under-charged for too long. Thirdly, Royal Mail should confirm its own support-I hope that this will also have Government support-for a new 10-year contract for the inter-business agreement with Post Office Ltd. Fourthly, Post Office Ltd should come up with detailed plans for its own mutualisation. Fifthly, large banks, especially those that are partly or significantly nationalised, should confirm that post offices will be able to access all their services over the counter. Lastly, it will be incumbent on all of us in our constituencies to ensure that we give maximum support to our post offices.

There is one last point to make. We know that only a third of post offices are profitable and that more than 6,000 are not making profits. Of course, the Government's one-off injection of £1.34 billion will help enormously and we should all be very grateful for that, but none the less these are small businesses. If a sub-postmaster decides to retire or to give up the business, this Government and this Bill can offer no guarantee that the post office will stay open. What they can do is provide a guarantee that there will be no further Government-driven programme of post office closures. It will then be incumbent on us all to try to ensure that the post offices are attractive enough to have a wave of new applicants.

I hope that I have shown where I believe there is work still to be done by all parties involved and also that this Bill offers a real way forward to respond to the three things that we all support: a flourishing collection, sorting and delivery service by Royal Mail; the universal 27 Oct 2010 : Column 400
delivery; and thriving community post offices. That is what we want to achieve, that is what the Bill offers and that is why I shall support it. There should never again be the shambles of the Kingsholm post office scenario.

Several hon. Members rose -

Madam Deputy Speaker (Dawn Primarolo):
Order. May I gently remind hon. Members that there are still 16 Members who would like to speak in the debate and that interventions lengthen speeches? So that hon. Members can help each other out, I would be very grateful if they kept an eye on the clock. If they can speak for less than six minutes, that will help enormously.

5.21 pm

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab):
I want to pose questions to the Government and to make some points, several of which have already been made, based not only on the general public's fear of what postal privatisation might mean for Royal Mail, but on why previous privatisations show that this privatisation and its minimum of 10% shares offered to current employees are not great enough or dynamic enough an offer to revolutionise how such a business could go forward in restoring, as Lord Young puts it, a "sense of ownership" for public sector workers. I want to ask why mutualisation of the Post Office has not been offered to Royal Mail, too, and to draw on the broader point that the Post Office and Royal Mail are inextricably and obviously linked and that their division weakens the service. I also want to show how the mutualisation of the one and the privatisation of the other will only ensure that both fail.

Historically, if we consider examples of previous privatisations of companies in the UK with fewer than 50,000 employees, we recall that none had a percentage of shares going to employees above 10% of all shares. That precedent of 10% shares sales to workers was set in 1987 by Rolls-Royce. Today, in 2010, the Royal Mail has 150,000 employees, more than three times that amount, yet the share sale proposed for staff is 10%. Why?

Why cannot the Royal Mail be mutualised alongside its Post Office sister? Why has that option not been considered to allow evidence-led policy? That proposition would allow better interdependent models of co-operation between Royal Mail and the Post Office. I remind the House that the Post Office depends on Royal Mail to provide it with one third of its revenue.

The National Federation of SubPostmasters is seeking a 10-year deal with Royal Mail, a deal that the Con-Dem Government will not guarantee as they have still not clarified whether Deutsche Post or the Dutch-run TNT will take over, rather than have a proper stock market share float. Also, the findings of a recent UNI Post & Logistics study into postal services liberalisation throughout the world are not encouraging and should be considered to inform evidence-led policy.

Postal privatisation has already occurred in a number of countries. Normally, the national operator is transformed into a corporation and split into several companies. Privatisation then follows.

Neil Carmichael (Stroud) (Con):
Will the hon. Gentleman give way?

Tom Blenkinsop:
I would normally, but I am pressed for time.

27 Oct 2010 : Column 401

Liberalisation is often introduced piecemeal, with the private sector being handed a slice of the pie at each stage. The report found that competition was often based on price-related targeting, as a result of which many new companies home in on niche targets and cherry-pick, concentrating on business-to-business, business-to-consumer, dense urban markets or bulk mail. Previously, Royal Mail was able to use profitable bulk mail business to cross-subsidise unprofitable but socially necessary deliveries to remote areas, but private competitors have snatched 40% of bulk mail in downstream contracts. As a result, Royal Mail's £233 million profit in 2006-07 was transformed into a loss of £279 million the following year. Privatisation and liberalisation have resulted in huge job losses and exerted pressure on wages and conditions.

Chris Evans:
Like me, my hon. Friend is a former trade union official. He knows that-

Madam Deputy Speaker:
Order. This is not a conversation.

Chris Evans:
My hon. Friend knows that TNT has a terrible track record on employee relations. If it takes over Royal Mail, will productivity be affected in terms of worker happiness?

Tom Blenkinsop:
As a former trade union official, who often likes to stand and cannot normally sit down, I agree with my hon. Friend. Between 1996 and 2006, Germany's Deutsche Post axed more than 21,000 full-time and 12,000 part-time jobs. In some cases, the employment situation has been transformed beyond recognition. In Holland, the 27,000 mail deliverers employed by the three major companies have service contracts rather than employment contracts, thus they are without employment protection, holiday pay, disability insurance and entitlement to unemployment benefits.

Mr Anderson:
The rigours of the private sector.

Tom Blenkinsop:
Exactly.

In Germany, only 18% of the jobs created by Deutsche Post's competitors are full time. Deutsche Post cut average pay by 30%, but things are even worse in the new competitors, where delivery workers in western Germany earn 40% less than their Deutsche Post colleagues and delivery workers in eastern Germany earn 50% less than their Deutsche Post colleagues. The disparity is starker still in Holland, where the total payroll cost for a postal worker employed by the main operator is €23 an hour compared with just €7.60 an hour for someone who works for its competitors, which pay by the piece.

The Bill provides no real protection for service users, irrespective of definitions of a universal service obligation. Clause 50(1) states:

"A consumer protection condition may require postal operators to be members of an approved redress scheme."

That is useless. Any future privatised service must be a member of such a scheme in order to give the consumer redress. The word "may" allows an opt-out and no consumer redress.

Again, the word is "may". There is no requirement that the provisions are checked.

27 Oct 2010 : Column 402

In conclusion, we are not looking at something new today. Other countries have gone down this road, and the result is a bad one for the staff, the business, other businesses and the general public. Put simply, if people live in a rural or far-flung area, are poor or are unable to pay for a promised premium service, they will suffer. What use to a postal worker is a market share in their own demise? What use to the general public and business, as service users, is a purely profit-driven postal business with no consumer redress, rather than a postal service that serves the public?

5.27 pm

Rebecca Harris (Castle Point) (Con):
I am grateful for the opportunity to speak in this debate, as the future of the postal service is a long-standing interest of mine, not least as the director of a company that was reliant on a dependable, reliable and efficient postal service. I do not underestimate the public attachment to Royal Mail and the wide interest in the implications of its privatisation. Given its universal obligation, everyone-businesses and the public-has an interest in Royal Mail's continued success.

An objective look at the situation is necessary. Richard Hooper made it clear to the previous Government, and has made it even clearer to this one, that Royal Mail urgently needs investment to improve its service to make it more efficient, competitive and effective in a more crowded and shrinking market. I do not want to underestimate the progress that Royal Mail and the unions have already made in that respect, as Hooper has also made clear.

The key question is how that progress can be accelerated. Investment is the key, and we need to ask ourselves how Royal Mail can bid for extra Government investment against the background of the economic inheritance that the previous Government left this Government, and other pressing claims on public funds such as defence, health and education. Royal Mail's pension deficit is growing all the time, and the situation is becoming increasingly urgent, if Royal Mail is, in the Secretary of State's words, to "survive and thrive".

The key proposals in the Bill cannot come soon enough, if we are to secure the future of our national postal service. These include committing to protect the universal service obligation, clearly demerging Royal Mail, protecting the post office network, taking over the burgeoning pension liabilities and enabling Royal Mail's 150,000 employees to have share rights. The share deal will give employees a leading role in the privatised new company. They will be able to bring their combined experience to bear in ensuring its success under new management. That deal is also important if an investor is to be attracted to Royal Mail to provide the fresh cash injection that we urgently need, because any investor will want reassurance that moves to improve the business will be strongly supported by employees. The generous share deal will give investors precisely that confidence, and it is one reason the Bill is far more attractive to potential investors and Royal Mail employees than the failed attempt by the previous Government to part-privatise.

I am extremely pleased that the Government are also protecting consumers by ensuring that the Post Office is not included in the privatisation and by categorically 27 Oct 2010 : Column 403
stating that there will be no repeat of the mass closures that almost everybody across the UK had to endure under the previous Government.

Mr Anderson:
Does the hon. Lady accept that more post offices closed in the years before the Labour Government than during their 13 years in office?

Rebecca Harris:
I thank the hon. Gentleman for that interesting observation.

Mr Anderson:
Does she agree?

Rebecca Harris:
I was not here at that time, but it is an interesting historical observation.

My constituents, like most others across Essex, suffered very badly from the epidemic of disappearing post offices in the past decade, which left many vulnerable constituents isolated and caused entire rows of traders to suffer. I am proud to support the Government in reforming the Royal Mail while ensuring that vital community resources are maintained. I also look forward to any plans that the Government might consider to give local communities and post office employees a chance to benefit from the success of their local branches.

5.31 pm

Mr David Anderson (Blaydon) (Lab):
What we have seen today is the Liberal Democrats covering for the long-term view of the Conservative party, which has always wanted to privatise Royal Mail. As far back as 1992 Michael Heseltine was clear about wanting to do that, but the public and Parliament would not let him. He came back in 1994 with plans similar to those put forward by the Labour Government last time round, but the plans failed then, as they did last year. Thankfully, the people of the country did not want that.

We have heard more and more today about the rigours of privatisation. What that means is taking away the service, screwing the workers into the ground, giving public money to private companies and taking money out of the country. That is what happened with the gas, electricity and water services.

Mr Robert Buckland (South Swindon) (Con):
I cannot let that comment pass. This is not some ideological crusade; it is about trying to create a modern Royal Mail service for the future. That is in the interests of the work force: we want to protect jobs, not lose them.

Mr Anderson:
I am pleased that the hon. Gentleman mentions the work force because I can now ask him, if he believes in the new politics, why not ballot the work force? If they say yes to privatisation, we will all shut up and go home. We will walk through the Aye Lobby if that is what the work force want-but I think he would be on a losser.

There are other examples. When we were telling Sid to privatise all the utilities, we were also creating the pensions mess that we are cleaning up today. The 13 years of pensions holidays under previous Tory Governments led to Royal Mail facing 38 years of paying back pensions. That is the main reason for today's comments about the public having to pick up the bill. As someone said earlier, we will get all the bad parts and the private sector will get all the good parts. That is exactly what happened with the coal industry: we privatised it and 27 Oct 2010 : Column 404
now we are buying coal from Ukraine and China. We put 200,000 miners on the dole, but that does not matter: it is the rigours of privatisation. The rigours of privatisation mean that 6,000 in China will be killed in coal mines this year, but nobody on the Government side cares about that. And what happened with the rail services? What happened with Railtrack? It failed. What happened with GNER and the east coast main line? They failed. What happened with east coast railways? They failed. The public sector had to come in and pick up the mess, and that is what will happen here.

We have also seen the development of markets in the health service. We had compulsory competitive tendering in the early 1990s-ideologically driven part-privatisation that meant that ordinary workers who had given their lives to public service were sent out to work for the Joe Bloggs cleaning company. We have seen it with foundation trusts and market-led rigours. What are they doing? The hospital in my constituency closed its laundry. Now, 5 million pieces of laundry have to be taken 140 miles, from the north-east to Leicester and back again, because it is cheaper. Those are the rigours of privatisation-forgetting the fact that 90 laundry workers have been sacked.

We shall see exactly the same thing with Royal Mail. It is clear what we can do in this situation. As I said earlier to the hon. Member for South Swindon (Mr Buckland)-he and I worked together for the Gurkhas-if he really believes that people want privatisation, he should be honest. Go out and hold a referendum: ask the work force what they think. When Royal Mail is no longer allowed to be called Royal Mail, it will no longer be allowed to put the Queen's head on stamps. The mail service will probably be subject to VAT.

It is clear that the public do not want the measure. The workers do not want it. The majority of people on the Opposition Benches do not want it, and the truth is that half the people on the Government Benches do not want it either, but they are being driven-

Anna Soubry (Broxtowe) (Con):
In my constituency there are 700 postal workers at the Beeston sorting office. To my knowledge, not one of them has written to urge me not to support the Bill. Two of them came to the Commons today to ask me not to support it-two in 700.

Mr Anderson:
I thank the hon. Lady for her intervention. If she would like to meet me outside in the Lobby, I will take her name and address and pass it to the general secretary of the Communication Workers Union. I will ask him to write to his 700 members at Beeston to ask them to contact their MP and tell her that they are happy to work for TNT or Deutsche Bank, and that they will be happy to see their pensions, shift allowances and jobs go down the river. If that is what the workers want, that is what the rigours of privatisation will deliver. The track record cannot be denied. We can pretend it does not happen, but that is the truth.

It is clear that there is nothing new in the Bill-

Robert Halfon:
It seems that clause IV is alive and well in the Labour party. According to the hon. Gentleman's logic, should he not nationalise everything? Why not put Sainsbury's and Tesco under state ownership?

27 Oct 2010 : Column 405

Mr Anderson:
I welcome the hon. Gentleman's view; perhaps he would like to join us. A number of us on the Labour Benches believe that doing away with vital public services has been a huge mistake. It cannot be denied. The truth is before our very eyes. The people of this country do not want their water, gas and electricity to be provided by the French and the Germans, and they certainly do not want their postal services to be delivered by the Dutch, the Germans or the French, which is where we shall end up if the Conservatives and the dupes who support them have their way.

5.37 pm

Damian Collins (Folkestone and Hythe) (Con):
Following the remarks of the hon. Member for Angus (Mr Weir) much earlier in the debate, I begin by pointing out that in some ways the Bill is too good to be true. He raised concerns that people in rural areas, especially in Scotland, would no longer have a universal service if the Bill is passed. However, the answer is that of course they will. People who live in built-up areas will continue to subsidise the post of people who live in rural and distant areas. People who live in constituencies in the south-east of England, such as mine in Folkestone and Hythe, will continue, relatively, to subsidise people who live in remote areas, because we all believe in universal postal provision, and that is included in the Bill.

Our concerns are that Royal Mail will run out of money to sustain its current universal six-days-a-week service unless its pension deficit is solved and, crucially, the business is transformed. That view is not unique to Government Members; it was expressed by the former Secretary of State, Lord Mandelson, when the previous Postal Services Bill was introduced in the House of Lords last year. There is a degree of common ground. It is a question of how we go forward in a way that gives value to customers of Royal Mail and the Post Office, and the taxpayers who must pick up the liability for the Royal Mail pension pot. Under the provisions of the Bill, the taxpayer will take on a considerable liability, so it is right that in return we should consider how the Royal Mail business can be transformed and work better.

Hon. Members have spoken about all aspects of the Bill; I shall touch on only a couple of them. Going back to the remarks made by the hon. Member for Angus (Mr Weir) and my hon. Friend the Member for Argyll and Bute (Mr Reid) earlier in the debate, clauses 35 and 37 provide that if Ofcom considers that the efficiency of the universal system can be better delivered with additional suppliers coming in to support that service, it will have the opportunity to advise the Secretary of State accordingly. That can only strengthen the quality of the universal provision. A number of hon. Members on the Government Benches would not see that as a bad thing.

Thomas Docherty (Dunfermline and West Fife) (Lab):
Does the hon. Gentleman accept that one of the great lessons of the privatised utilities is that none of the regulators have had sufficient teeth to stand up for the interests of consumers? Why should the regulator in this case be any different?

Damian Collins:
I can speak only from my own experience, having previously worked in the advertising industry, where we encountered the wrath of Ofcom. It 27 Oct 2010 : Column 406
seemed only too ready to stand up for the rights of consumers, and I have every confidence that it will do so in the case of postal services too.

Opposition Members have asked repeatedly what guarantees there are. What guarantees have there been for the Post Office and Royal Mail over the past 13 years, when we have seen thousands of post offices closed? The hon. Member for Hampstead and Kilburn (Glenda Jackson) gave an impassioned speech about the removal of post office services and sub-post offices from her constituency. We would all concur with that, and we would all share the view that they play a vital role in the community, but the previous system made no guarantees to those post offices. We have seen a slow withering of the post office network on the vine, a slow reduction in the support for post offices, and their closure. We cannot go on like that.

I am interested in the provisions of clauses 26 and 27, which give authority to postal service providers and get rid of the current licensing regime. The Secretary of State believes that that will be more efficient and cheaper for businesses. I would be encouraged if the same mechanism allowed new providers to come in. During the debate, hon. Members have asked how new sub-post offices can open and how postal providers can come into the market.

In my constituency-other hon. Members may have had the same experience-to try to fight the pressure for branch closures, independent businesses fought hard to keep those post offices open. The Enbrook Valley post office in my constituency is a sub-post office run by an independent retailer. He had to fight hard to maintain that provision. He wanted to put a business case together to keep that post office working, and with the support of the local community and money raised by the local community, he did just that. I would like to see more of that, and the process made easier through the Bill.

I am interested in the work of organisations such as Pub is the Hub, which try to turn pubs into multifaceted businesses, particularly in rural communities, where the post office can play a part too. In a village in my constituency-Elham, where I live-when the post office closed, provision was transferred to a counter operating in the King's Arms pub. Never before had it been realised that there was such demand for picking up books of stamps at lunchtime. There may well be more business models like that which we could encourage, through a mechanism that encourages new providers to come into the post office branch network market.

I agree that it is right that the post office network should not be privatised as part of the provisions of the Bill. However, that does not mean that there should be stasis around the post office network, with nothing changing. Although we welcome the money that the Secretary of State announced today to support the network, that does not mean that there cannot be innovation in provision and an attempt to attract new providers. I look forward to debating the Bill, especially clauses 26 and 27, and listening to the debate as it progresses through Parliament. May it offer some opportunity for new providers to come in, and for the Secretary of State to encourage and support that.

27 Oct 2010 : Column 407

5.43 pm

Mr Russell Brown (Dumfries and Galloway) (Lab):
I apologise to the House for being absent this afternoon. When I applied to the Speaker to take part in the debate, I stated that I would have to chair a meeting at the offices of the Department for International Development, which was the reason for my absence.

The Bill is undoubtedly contentious. Although some would like to do so, we cannot separate Post Office Ltd from Royal Mail and that part of the business that the coalition Government seek to privatise. I should declare an interest as Chair of the all-party group on post offices.

I am deeply disappointed, because, having been in the Chamber when the Secretary of State made his opening remarks, I feel that there has been something of a mad dash to introduce this legislation. I admit that he talked about the right things as far as I am concerned, such as mutualisation and everything that that offers, but I am disappointed, because he should have examined the issue in more detail before we reached this stage of the Bill.

I am not here to negotiate on behalf of either the employees of Royal Mail or the Communication Workers Union, but 10% shared ownership is almost derisory, and a greater shared ownership figure might have been more acceptable to some at the forefront of the issue.

I accept that there is a demand for modernisation and for greater efficiencies. I do not think that anyone in this House fails to recognise that. I appreciate that some Members will have visited their local sorting offices, but I say to Members from all parts that if they speak to their local staff, as I regularly do at my five local sorting offices, they will hear each and every worker, including their managers, say that they have done their utmost to adhere to what the company has asked of them. They have modernised.

We have reached the stage at which any further attempts to make some of those businesses more efficient will result in job losses, and employees are at a total loss to understand what more they can do as individuals in that work force. We have seen 50,000 jobs lost, and, if the Bill is passed and delivers what many Opposition Members think it will, we could see another 50,000 to 60,000 job losses.

I represent a rural constituency, and the universal service obligation is sacrosanct, but is absolutely nothing in the Bill provides a cast-iron guarantee that the current six-days-a-week delivery to every door will continue. I mentioned-and I wish to mention again-that I recognise that there is a black hole in the pension fund, but it is a significant pension fund, and I issue a warning to the coalition Government. I sincerely hope that they go nowhere near that pension fund to do what the previous Conservative Government did to the bus employees' pension fund after bus deregulation.

This is a Bill with unintended consequences: the closure of post offices. I know that Government Members have mentioned what the previous Labour Government did, but if they cast their minds a little further back, they will find that thousands of post offices closed on an ad hoc basis. There was no structure to their closure at all, and I say to the hon. Member for Folkestone and Hythe (Damian Collins)-it was a point that I wished to make in an intervention on him, but I shall make it 27 Oct 2010 : Column 408
now-that the things that keep post offices open today are, without a shadow of a doubt, the access criteria. I do not know whether the Government intend to keep those criteria in place.

Some 41% of the business that our post offices transact daily is as a result of the inter-business agreement. The National Federation of SubPostmasters wants a 10-year agreement, and anything less than that will result in post offices withering on the vine. So, there is a warning: the 10-year agreement that has been asked for should be carefully considered.

Post bank is not the white knight that we all expected, but it must be introduced. In a briefing, the postal services Minister did talk about asking Departments to provide additional business for our post offices. I only wish that that could happen. If it were possible, and if we were able to make it happen, it would have happened by now.

The issue of green giros has been raised, but the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), who is responsible for pensions, refused to meet a small delegation from our all-party post offices group.

I thank you for calling me, Mr Deputy Speaker, but I urge caution on this Bill and on the unintended consequences that it could bring.

5.49 pm

Jake Berry (Rossendale and Darwen) (Con):
Today's debate has been very interesting. I will set out-briefly, because time is short-why I support the Bill.

Years of falling mail volumes-down 15% since their peak-together with low profit margins and a huge pension deficit have mortally wounded our Royal Mail. Doing nothing is not an option if we are to retain a world-class mail service and, most importantly, retain our world-class work force within it. Real reform of Royal Mail was put in the "too difficult" pile by the previous Government, but there were some attempts to change our post office network, including the closure of 5,000 post offices. In my constituency, this included our village shop, and it was a double blow to the rural community. We have lost services such as Sunnyhurst post office, which is still missed by the residents of Darwen. Nothing could have better shown the chaos of this closure programme than the former MP backing the campaign by the Lancashire Telegraph to keep the post office in Darwen and then voting in this place against our proposal to stop such closures.

These losses of service have been most keenly felt in our rural areas, where a lack of broadband and other forms of rural isolation mean that residents are heavily reliant on the postal service to keep in touch with the outside world. I have recently written to Royal Mail after learning that postmen working in the village of Edgworth in my constituency have been instructed to return undelivered packages to Bolton rather than to our small post office in Edgworth. Residents are now expected to make a 14-mile round trip and use a sizeable part of their day to collect parcels. Other poor reforms by the previous Government included the loss of the morning delivery in many areas, including at my house, where we wait until 1 pm or 2 pm for the post.

27 Oct 2010 : Column 409

The Government's proposals, set out in this Bill, are a once-in-a-generation opportunity to transform the culture of Royal Mail. It will open it up to private investment and expose it to the rigours of private sector efficacy but it will, crucially, maintain the universal postal service. When looking at these proposals, we must keep in mind that the real experts in this field do not sit in this House-they are the people who work in Royal Mail. That is why I am delighted that the Bill includes the principle of 10% ownership for employees and the mutualisation of the Post Office.

Supporters of the radical changes that this Government have brought about in schools know that the expertise for running schools does not rest in Whitehall. Likewise, the Bill acknowledges our world-class work force, their passion for the business, their dedication to service and their future at the heart of Royal Mail. If Royal Mail is to modernise, it must bring its work force along with it, and I believe that the 10% ownership measure will do that. Crucially, however, it must avoid militant opposition to privatisation. During the last Royal Mail strike in Manchester, the business in which I worked moved from sending out approximately 1,000 invoices a month via mail to an online and e-mail invoice delivery system. I am sorry to say that after the strike ended, having spent time and effort on moving the system online, we never went back to posting our invoices again. I urge the unions not to swing a wrecking ball at Royal Mail. Royal Mail undoubtedly faces challenges from falling mail volumes, but we must be realistic, and I am sure that a modern Royal Mail with proper employee participation would meet every challenge ahead of it.

Although we currently have 51 licensed postal operators, Royal Mail has not previously been attractive to outside investment owing to its pension deficit. Again, doing nothing is not an option. In this Bill, the new coalition Government take on the deficit, putting the company on a firmer footing while protecting the pensions of all Royal Mail employees past and present. I support the Bill, I support the universal postal service, and I applaud the principle of employee participation.

5.54 pm

Stella Creasy (Walthamstow) (Lab/Co-op):
I am grateful for the opportunity to speak in this debate about the future of our postal services. I speak as both a Labour and a Co-operative Member, concerned to ensure that, as co-operative ideals and models become popular, there is clarity about the opportunities that those ways of working present and the models that can be used. I speak also as a Member who has tabled a ten-minute rule Bill for presentation next Wednesday on the benefits to be gained by securing affordable credit for all citizens, through credit union services in a tie-up with the post office network. I wish to focus on that point today.

I tabled my Bill because I am deeply concerned that the Government have not yet understood the nature of personal debt and poverty in communities such as mine, in Walthamstow. I therefore urge Ministers to do more to revise their plans to ensure that the post office network can offer affordable sources of credit. From the credit review that they are undertaking, they will be aware of the need to do more to ensure that people can access a wide range of financial services. I hope, through 27 Oct 2010 : Column 410
my Bill, to convince them not to ignore those for whom credit cards and store cards are not an option, and to protect those who can access credit only at extortionate prices through doorstep lending companies. They can do that, not least, by dealing with the lack of competition in the financial services market for those who are on low incomes or have bad credit ratings.

It is worth remembering that six lenders account for 90% of the home credit market, and that there is little competition to drive interest rates down. Provident, which accounts for 60% of the doorstep lending market, has stated that, thanks to the Government's policies, it expects a growth in its target market, which, in layman's terms, means the poor and those unable to access credit through mainstream banks. Increasing access to credit unions that offer loans at more affordable rates by working with the post office network would help tackle that monopoly and protect consumers. The Bill provides the ideal opportunity to do what the previous Government wanted to do and build on that partnership.

Consumer Focus, an organisation that many Members have quoted today but which the Government seem to want to dismantle, has been a powerful advocate of the potential for credit unions and post offices to work together. The suggestion has been promoted also by the Association of British Credit Unions, whose work on the matter I commend.

Today, we have heard that the Government intend to protect the post office network through the provision of a subsidy, but we have no detail about how much of that will actually go to post offices and how much could be diverted, for example into the costs of a restructuring. One suggestion that I would make to Ministers is that some could be used to support the one-off investment needed to provide the common back-office platform that would allow technical integration between Post Office banking services and those of local credit unions. Consumer Focus has championed that idea because of the benefits to both credit unions and post offices.

Such a link-up would enable post offices to offer a wider range of services, including, critically, instant small-scale loans of anything from £30 to £400, which are a vital service for many of my constituents. Credit union customers would also be able to access their accounts and make payments at the post office, and in turn each transaction would generate a transaction fee, which could provide a new stream of revenue for the Post Office.

So far so great, but the question is how to make that happen, not just in one post office but across the country. I wish to push the Minister to give some detailed answers on that point. The Bill is intended to keep the Post Office in public ownership by turning it into a mutual, but the devil is in the detail of the proposals. As the Government accept, only 370 of the 11,500 post office branches are directly managed by the Post Office. The rest are sub-contracted to franchisees. That means that the vast majority of post offices depend on other businesses as well as the Post Office to remain sustainable. Without a clear and confirmed business plan that will bring in new sources of funding, there is little hope that their services, and so their stores, will continue. Ministers must understand that that generates a lot of concern among those of us interested in the potential tie-in between credit unions and post offices.

27 Oct 2010 : Column 411

The post office becoming the front office for government would offer one stream of revenue, but it is worth remembering that the benefits business of post offices has declined since 2003, a trend that is likely to continue given the Government's benefit reform plans. Even if that business is sustained, what they offer with one hand they risk taking away with the other. With no obligation for the reconstituted and privatised Royal Mail to work with the Post Office, we risk the core business of post offices shrinking. The Government have suggested that a privatised Royal Mail could still use the Post Office to provide its counter services and offer some protection through an internal business agreement, but given that they cannot guarantee that that will be commercially binding, it is not a certainty. That is why the Co-operative party has set out its concerns about the proposals today.

Let us be clear: those of us who are co-operators would like to see a people's Post Office, with the public, postmasters and others having a say in how it is run. However, there is deep concern that that cannot be delivered through the privatisation of Royal Mail, because it will put so much of the business on which post offices rely at risk. Royal Mail business accounts for approximately a third of Post Office business, so clearly, any reduction would mean that thousands of post offices became unsustainable and closed. We therefore do not accept the idea that the Post Office and Royal Mail should be treated separately. Those of us who see the relationship that could be achieved between the credit union movement and the post office network see the clear link between the Post Office and Royal Mail. We therefore see the importance of setting out how to protect the 11,500 post office branches.

As I said at the beginning of my speech, there is a desperate need to support those on lower incomes to access financial services and affordable credit. I failed last night to persuade Treasury Ministers to take those concerns seriously and to meet me and campaigners to discuss them and my Bill. I hope to fare a little better today, so I ask again for Ministers to meet me and campaigners to consider how we can extend affordable credit to all in our society, and how we can support that through post office network reforms. Only in that way will we be sure that the potential tie-in between credit unions and post offices can be secured. Without such guarantees, there cannot be an open branch network to support the credit union movement, and the Opposition will return the Bill to sender.

Several hon. Members rose -

Mr Deputy Speaker (Mr Nigel Evans):
Order. There is half an hour left and eight Members are trying to catch my eye. If everybody shows restraint, we might just get everybody in.

6 pm

Priti Patel (Witham) (Con):
I will show some restraint, Mr Deputy Speaker.

I should declare an interest. I am not a member of the CWU, but I am the daughter of a former sub-postmaster whose post office business was closed down under the previous Labour Government during their ruthless post office closure programme. It will come as no great surprise to the House that I support not only the Bill but the need for root-and-branch reform of 27 Oct 2010 : Column 412
Royal Mail. We need to innovate to make Royal Mail not only economically viable but sustainable in the long term and efficient.

We heard from the Secretary of State that Richard Hooper's report earlier this year pointed to the dire financial position of Royal Mail. Clearly, that is unsustainable. He also said that the injection of private capital to modernise Royal Mail was vital. I have sat through most of the debate, and I am stunned by Opposition Members' lack of enthusiasm for reform and modernisation, particularly given their legacy.

There are some very good points in the Bill. It is worth noting that the pensions of Royal Mail workers will be safeguarded. After all, earlier this year, a CWU publication entitled, "Time to Deliver-Royal Mail Pension Fund Deficit", stated that the previous Government's

"decision not to proceed with the Postal Services Bill has meant this vital pension reform has been shelved. This position is untenable. The government must take responsibility for the deficit if the industry is to succeed."

Our Government should be congratulated on their boldness. They have taken on that commitment and the liabilities for the record and historic deficit, which is vast.

Much more in the Bill should be welcomed not only by my hon. Friends but by Opposition Members, including safeguarding the universal postal service and the provisions of clause 30. My constituents will be reassured by the commitment to the universal postal service. As the daughter of a former sub-postmaster, I know how vital that is. I have a very rural constituency, and many of my residents will be reassured.

My constituents will also welcome the measures that safeguard the future of the Post Office in clause 4, which states that no more closure programmes will be introduced. I find the hypocrisy of Opposition Members astonishing. They are scaremongering and trying to mislead the public, but it is about time that they faced facts. We are committed to ensuring that there are no more post office closures. It is utterly disappointing to hear their tone and some of their criticisms. However, Government Members should not be surprised. We should remember that the Labour Government had the chance to reform and modernise the Post Office, but because of their union paymasters, they simply bottled out and failed.

There is a lot to be grateful for in the Bill. The accusations of ideology are utter nonsense. I welcome the Bill because it will lead to much needed, crucial reform in terms of competition and deregulation. We are getting rid of an over-regulated service and bureaucracy, and we are empowering Royal Mail workers-share ownership is absolutely vital. On that basis alone, I support the Bill. I think this is a marvellous Bill going forward.

6.4 pm

Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab):
It was enlightening to discover that the father of the hon. Member for Witham (Priti Patel) was a sub-postmaster. I understand that her great hero was the daughter of a shopkeeper. Let me suggest that the style that she has adopted is somewhat similar.

We have heard a lot today about the Post Office and the implications that the privatisation of Royal Mail will have for it. In most countries, collection and delivery 27 Oct 2010 : Column 413
services, as well as the network of post offices-that is, the universal service obligation-are protected by statute. That is the case in the United States of America, and in the two countries with the most successful mail companies in the world: Netherlands and Germany. The detailed rules in Germany are as follows. There must be a post office in each community, designated a "local centre" by planning regulations. There must also be a post office in each community of 4,000 inhabitants. In urban areas, customers must be no further than 2,000 metres from a post office, and in areas not otherwise covered, a mobile service must be provided. In effect, those rules mean that Deutsche Post must keep open a minimum of 12,000 post offices.

The Bill contains no specific criteria regarding post office numbers. That would not have mattered, had an integrated mail and postal entity remained in state ownership. I say that because despite what the Secretary of State said earlier, it is indeed the case that the relationship between Royal Mail and the Post Office was structured by Government ownership. Of course it was: it was structured by the criteria that the Government set and under which those two entities existed. Let me be clear: there is no requirement in the Bill for any mail company to use the existing post office network. If Royal Mail ceases to use the full postal network, the Post Office will be bankrupt.

Predictably, and in order to deflect attention from that question, the Government have today announced what seems to be a large subsidy, although I would caution hon. Members on both sides of the House about that. The devil will be in the detail, because not only does the £1.3 billion announced cover the entire period of the spending review, but there is no assurance that all the money will go on a subsidy. As my hon. Friend the Member for Walthamstow (Stella Creasy) said, the money could be used for restructuring or other management costs.

In the end, there is no substitute for sound protection of the network through regulation. It would be dangerous in the extreme to make the post office network solely dependent on the tender mercies of the Treasury. What the Government propose is a structure that puts the long-term future of the Post Office in grave danger, with the faultline concealed by the creation of a short-term subsidy. What the Minister is doing, when one dispenses with the smoke and removes the mirrors, is putting in place a policy that, down the line, will facilitate the shutting of post offices. That will happen at a point in the not-too-distant future, when the Treasury's munificence is withdrawn.

I said earlier that most countries had statutory rules protecting the number of post offices. Until now, there has been one notable exception to that rule: Sweden. Sweden adopted plans that bear some resemblance to those advanced by the Minister. The National Audit Office passed the following harsh judgment on the practice in Sweden, saying that

"its attempts to reform its post offices network were drastic, poorly thought out, and initially were most unpopular. It is clear that"

the Swedish postal service

"was acting freely and without government interference until the unpopularity of the changes introduced in 2000 onwards became apparent. At this point political pressure was brought to bear."

27 Oct 2010 : Column 414

I do not know which management consultants the Swedish Government consulted, but I do know from the Wikipedia entry for the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey) that he spent his career before he became an MP privatising mail services around the world. When I last debated the issue with him, he refused to engage with these detailed questions. I now know that that is not because he did not understand them. Might it be because the Treasury is insisting that the long-term demise of 7,000 rural post offices is a price that must be paid to ensure that the equity price for Royal Mail remains high?

6.10 pm

Julian Sturdy (York Outer) (Con):
Before us today is a truly national piece of legislation. Our postal service is a cornerstone of British life. It is a frequent source of frustration for many, alongside the weather and-particularly on this side of the House-the BBC, but it is also a traditional source of reassurance. Remarkably, a postal service was first made available to the general public back in 1635 when Charles I was on the throne. Over the years, it has evolved and adapted, albeit slightly slowly at times, but even today people up and down the country still depend heavily on our postal services. That is particularly the case in rural areas, including many of the villages in my constituency. Local post offices are often the commercial bedrock of such villages, the sole shop in the area and a gateway for correspondence to reach any destination in any part of the world. They are also a lifeline for elderly residents.

In the past, the closure of post offices has caused real problems for local communities, which often launch proactive campaigns to retain their vital services. We have already heard about many such campaigns in the debate today. Indeed, before being elected to Parliament earlier this year, I had visited Westminster on only one previous occasion. I was a parliamentary candidate delivering a petition to No. 10 Downing street with residents from Fulford, as part of our campaign to save our local post office. Sadly, our noble attempts failed, but I saw at first hand how passionate local residents can be about their local services, particularly the post office. I also saw the impact that such losses can have on a community.

So, let the first premise of today's debate be that the country still values and depends on local post offices. Acknowledging that fact should not, however, make us averse to the reform that our postal service so badly requires. On the contrary; our desire to protect the Post Office should result in greater determination to reform and indeed privatise Royal Mail. By reforming the latter, we will be protecting the former. It is on that basis that I broadly support the Bill.

As with all difficult pieces of legislation, it is important to remember why we are here. Royal Mail's financial health continues to worsen, with its market share declining. The pension deficit is more than £10.3 billion, and the regulatory regime is not fit for purpose. Royal Mail is not sustainable in its present format, and would eventually fail completely if the status quo were allowed to continue unchecked. These were the conclusions of Richard Hooper's 2008 Government-backed review into our postal services. Richard Hooper has also recently commented on the unnecessary 20-month delay that resulted from Labour's 27 Oct 2010 : Column 415
ditched reform plans. In his opinion, the situation has got worse, and doing nothing is simply not a tenable option. Once again, real action is required, and once again, it takes this Government to lead the way.

By opening up Royal Mail to private investment, the Government will relieve the organisation of its enormous and historic pension deficit, and at least 10% of shares will go to Royal Mail employees. Attracting an injection of private capital into Royal Mail will end the dependence on funding from the taxpayer. New commercial disciplines will be introduced to the business, alongside a new businesslike culture that is driven, focused and capable of delivering the very best service to the public. Privatising Royal Mail will, in essence, secure its long-term future. At the same time, this privatisation ensures that Post Office Ltd is not for sale and that the 11,500 post office branches across the UK will remain in public ownership. Despite what has been said by Labour Members, there will be no further programme of closures, although such a programme frequently occurred under the previous Administration.

Despite my general enthusiasm for the Bill thus far, I would like to raise one specific point of concern: the future of sorting offices. Unlike post office branches, sorting offices are, of course, operated by the Royal Mail. I have already touched on the local importance of our universal postal service and the role that post offices play in our local economies. The same principle can be applied to sorting offices, so I urge the Government to highlight the importance of retaining sorting offices-at least in every major UK city, such as my own of York-in any negotiations with private investors. I strongly believe in the Government's localism agenda and any attempts to maintain at least city-based sorting offices would, in my view, be welcomed in our northern and rural economies, where such offices often employ many and play an important role in the efficient delivery of postal services.

In summary, the universal postal service remains a traditional, well respected and relevant part of our national life, but to allow the status quo to continue, out of some nostalgic fantasy, would be devastating in the long run. The reforms in the Bill strike the necessary balance-taking action to control the pension deficit, further modernising our postal services, providing an exceptional employee share scheme and, most importantly, ensuring the survival of post office branches across the country.

6.16 pm

Michael Connarty (Linlithgow and East Falkirk) (Lab):
I declare an interest, as I have worked with the Scottish branch of the National Federation of SubPostmasters over a number of years to oppose the closure of post offices introduced by the last Government, and I will continue to oppose closures. I have also worked with the Communication Workers Union, while my predecessor Harry Ewing-now, sadly, deceased-was a postman and eventually a Minister. I am deeply involved in this, and I am secretary of the liaison group for the Communication Workers Union in this Parliament.

The Bill does not provide a logical or necessary solution to the problems of Royal Mail, and it is not the only response to the Hooper report. It is, indeed, another 27 Oct 2010 : Column 416
Liberal Democrat betrayal. It is not part-privatisation, but a political decision by the Liberal Democrats to join in the carnage in the public sector.

Lorely Burt rose -

Michael Connarty:
I will take no interventions, as many Members wish to speak and I want to take just six minutes.

This is not about a part-share sale, which was the policy on which the Liberal Democrats were elected, but, to quote from the Bill, it is about allowing

"for an unrestricted sale of shares in Royal Mail".

The Bill returns to the 1992 plan to break the link between Post Office Ltd and Royal Mail, with all the duplication of management and logistic structures that it will require, which will eat massively into the £1.2 billion set aside to set up a separate Post Office Ltd. It will tear up the operating synergies, which provide a third of Post Office Ltd revenues from services provided for Royal Mail, and there is no guarantee that these will continue. The current subsidy is £180 million a year; it will have to rise £270 million a year to sustain the post office network in future.

The problem is that there is no guarantee that the subsidies will be provided. Clauses 11 demands only an annual report and says nothing about what the Government will do to guarantee the post office network that sends the report. The sub-post offices' postal and Royal Mail services that are vital to the commercial survival of villages and the sub-post offices in rural and urban areas will be jeopardised.

The Hooper report called for a number of things, none of which required the privatisation of the Post Office. The final report specifies three necessary elements: private sector investment, the Government taking on pensions, and changing the regulations, as the Bill does-in fact, in that respect, it is exactly the same as the previous Labour Bill. Hooper 1 recommended new management, and we have it, from a noted organisation that has been associated with high-quality services; Moya Greene has come from Canada Post to run Royal Mail. All parts of Royal Mail, including Post Office Ltd, are profitable at this moment. There is no need for a subsidy.

On the recommendation on pensions, let us look at what happened with BT's pension deficit. The Government thought that they had taken on a liability of £7 billion, but the High Court has just ruled that the liability is an exposure of £24 billion, because it must include everyone who joined BT after its privatisation. There are no guarantees that the same will not happen with this privatisation. The clear and simple way to deal with the matter is to accept that we must nationalise the debt. If we did that now, Royal Mail would not have to pay £291 million a year to service its deficit. The changes involving Ofcom would bring in another £120 million of income, which would make £411 million available to Royal Mail to complete its modernisation.